Mar 2015

31 March 2015

The four STEPs to customer commitment

We have made the case that customer loyalty doesn’t (and can’t) truly exist, but customer commitment can and must be the goal for today’s and tomorrow’s best brands.  Further, we have offered a way to assess a brand’s level of customer commitment, the “Commitment Equation”1:

 

A high level of customer satisfaction, plus no really attractive alternatives, plus a high level of personal investment in the brand’s offerings means a highly committed customer base.  [See here for more.]

Of course, offering a way to assess how committed to your brand your customers are is only the first step.  Companies can take four specific STEPs beyond this to strengthen and grow commitment effectively among their customers:

Strong Basics:  Strong Basics are must-haves—the fundamentals.  Obviously, the better a brand performs at the fundamentals of what it does, the more satisfied customers will be, the less attractive alternatives will look, the more customers will feel they will lose too much if they switch.  What are the Strong Basics?  They are excellent products, superior customer service, compelling ancillary features and services, a price worth paying—the fundamentals of any business.

If a brand can find a way to be far superior to its competitors on the Strong Basics, that brand can build a highly committed customer base; but in today’s marketplace—particularly in mature product categories—such a level of superiority is hard to come by.  In her book, “Difference,” Harvard Business School marketing professor Youngme Moon makes the point clear:

“In category after category, it has become apparent that competitive differentiation is a myth. . . .  Companies have gotten so collectively locked into a particular cadence of competition that they appear to have lost sight of their mandate—which is to create meaningful grooves of separation from one another.  Consequently, the harder they compete, the less differentiated they become. . . .  They have become masters of a particular form of imitation.  Not differentiation, but imitation. . . .  The differences are there, but they are lost in a sea of sameness.”2

In a world where performance on the Strong Basics isn’t enough, brands need to look beyond these to build and strengthen customer commitment.  That’s where the Traps, Exclusivity, and Personalization parts of STEPs come into play.

Traps:  Traps are good things if you’re a lobsterman, not so much if you’re a lobster.  In the world of business, Traps are by definition a negative form of customer commitment.  But certainly one way to gain customer commitment is through devices that attract customers to the brand, and then immediately shut the door to their ability to exit.  The most obvious Traps are term contracts that lock in customers for some period.  Customers can always free themselves, but only at the cost of a financial penalty.  In our consumer research experience, contracts are too often the bane of the customer’s experience with brands that require them; and that makes Traps only a short-term commitment tool (especially if the brand is less than superior on the Strong Basics).  We hear customers say all the time, “I can’t wait for my contract to end, because when it does I’m gone.” 

Contracts may be the most obvious Trap, but they aren’t the only one.  There are countless instances where the customer isn’t particularly satisfied but feels stuck, because they can’t see a viable alternative to their current provider.  The most obvious instance of this kind of Trap is a monopoly, wherein the customer actually has no alternative; but there are also situations where the customer has alternatives but feels those alternatives are even worse than what they have, and so they feel stuck with their current brand as the least objectionable alternative.

A study by some European academics identified yet a different kind of Trap.  They found that a customer of a company that has very high satisfaction ratings overall tends to have few alternatives to go to, and therefore is less likely to churn, even if he or she is a relatively unsatisfied customer. 

Exclusivity:  Brands that offer something of value that no competitor does or can automatically reduce the attractiveness of those competitors and create a huge barrier to churn by creating a “too much to lose” situation in the mind of customers.  For example, in the pay-TV business there’s only one place to get the NFL Sunday Ticket—DIRECTV.   It’s a perfect example of the kind of exclusive offering that makes it difficult for Sunday Ticket subscribers to leave DIRECTV, even if they aren’t particularly happy otherwise.  The Sunday Ticket is DIRECTV’s masterstroke at creating Exclusivity:  it holds DIRECTV subscribers firmly in place. 

Personalization:  In the world of business, Personalization creates habit-forming products—offerings customers don’t want to put down and certainly don’t want to lose3.   Personalization (i.e., customization) is a hook that drives customer engagement and commitment.  The more a brand can personalize its product for customers, the more invested in the brand customers become, and the more (as a result) they have to lose if they were to switch. This is, in significant part, what is motivating Verizon FiOS’s recent (and much-discussed) move toward offering a la carte TV programming choices.  By giving their customers what they want—as much or as little as they desire—they are hoping to bring the Goldilocks Principle into play, driving customer affinity and commitment toward Verizon FiOS.  At the same time, the more a brand knows about its individual customers’ interests and behaviors, the more that brand can use such information to personalize its product.  There are at least two forms of personalization in the pay-TV business that make customers invested in their provider: 

(1) Recorded programming:  the more extensive the subscriber’s list of recorded programming, the more that customer has to lose if he/she thinks about switching (think “The Sopranos” or “House of Cards”)
(2) Easy discovery:  features that help customers easily discover new programming (via recommendations based on programming watched) help strengthen customers’ investment in their current provider 

Customers who use the recommendations feature to discover new programming know that a different provider would have to start from scratch in “learning” the customer’s programming interests and offering recommendations based on the customer’s viewing behavior. 

The bottom line here is that if you want customers who are committed to your brand—unmoved by competitive offers—you need to engage them with your brand.  And the best way to fully engage your customers goes well beyond superiority on the Strong Basics of what you offer, and doesn’t even include Traps, like term contracts.  The best way to separate your brand from your competitors is to double down on whatever Exclusivity and Personalization you have to offer or can develop:  exclusive offerings that make your customers realize they have too much to lose to even consider going elsewhere and personalized offerings that get your customers thoroughly engaged and fully invested in your brand.

1 For use and development of the term “commitment equation” in a very different context, see Heidi Reeder, “Commit to Win: How to Harness the Four Elements of Commitment to Reach Your Goals,” Penguin Group, NY, 2014.
2 See Youngme Moon, “Different:  Escaping the Competitive Herd,” Crown Publishing Group, NY, 2010, pps 11-13.
3 See Nir Eyal, “Hooked:  How to Build Habit-Forming Products,” available through Amazon Digital Services.

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